The reasons to be bearish on the market now are swamping the bull case

While optimism is on the ropes, the U.S. economy is far from being weak-kneed.

GDP growth continues to shine, and the fourth quarter is likely to be around the 3 percent level that would be consistent with the full year. The jobs machine continues to crank on all cylinders, with October alone adding 250,000 positions and wage growth that surpassed 3 percent year-over-year for the first time since the recovery began.

There’s also some trust that should things take a more pronounced downturn, the Federal Reserve will step in and halt or slow its interest rate increases.

However, there’s a good news-bad news scenario there as well.

“A pause in the tightening campaign might be cheered by markets, but only if economic growth remains healthy and inflation risk has ebbed,” the Schwab strategists said. “If the Fed is forced to lift its foot off the brake due to a sharper rolling over of growth — or in the face of rising inflation — markets would not likely take that as kindly.”

The election passing also is a cause for at least relief, as no post-midterm year has been negative since the end of World War II.

That doesn’t mean volatility can’t stick around. The Schwab note points out that the Black Monday 1987 crash was a year after the 1986 midterms.

The jobs picture also must be watched with caution. The 3.7 percent unemployment rate is well below what the Fed considers full employment, meaning that a turnaround in the jobs market seems only a matter of time.

“At the point the unemployment rate begins to tick higher again, it’s likely the countdown to the next recession will begin based on history,” the Schwab note said.

The brightest argument, then, may be that the market’s ups and downs are just the typical gyrations that nonetheless have been absent for much of the bull run that began in 2009. After all, even with Monday’s slide in stocks, the CBOE Volatility Index, which measures market fear, was barely above 20, or it’s long-term average.

“This is kind of where we are at right now,” Kinahan said. “There should be the possibility that sometimes stocks go down.”

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